The Maui Real Estate Blog

Ownership Considerations of a Maui Vacation Rental

While the allure of owning your very own Maui vacation rental is an attractive and prestigious idea, there are many factors to consider before pulling the trigger. Helping clients buy and sell vacation rentals is a speciality of ours, so we have first hand insights of the work and expenses that go into maintaining one.

Management Fees

Since owning a vacation home entails not being able to spend time at the property all the time, a management company is a sound choice to help maintain the property and look after rental reservations.

There are a few options available to be utilized. At some South Maui condos, there is an on-site management office that can handle the services required to maintain a vacation rental; however, depending on the rental revenue splits agreed upon, some on-site offices (usually the larger ones like Aston or Outrigger) will charge as much as 50% of rental revenue.

Aside from on-site management offices, there are local property management companies that specialize in offering their services as vacation rental property managers. Their rental revenue splits can be a little more favorable than on-site management, but they do have other accounts to look after and are not solely dedicated to a single complex like on-site management offices.

Although there are plenty of property managers out there, look for one who specializes in vacation rentals or who at least has some experience in handling them.

Tax Implications

In addition to revenue splits with management companies and capital gains tax, owners are burdened with two other tax requirements that buyers may not always be aware about.

Vacation rental income is subject to:

General excise tax of roughly 4%

Transient accommodation tax of a little over 9%

It’s always best to consult a tax professional for a full break down of the tax obligations associated with owning a vacation rental.

Cleaning Fees

Between each guests, hiring a cleaning service to do a full top to bottom cleaning is a necessary step in providing an excellent accommodation to guests and building your vacation rental’s reputation. Nobody likes a dirty accommodation. Over time, cleaning fees add up and is often an overlooked expense when figuring out the bottom line.

We recommend trying to negotiate a flat vs getting charged per cleaning. Owners should try to negotiate a favorable pricing structure considering you will be sending a lot of business the cleaning company’s way.

List of Backup Vendors

Creating a list of back up vendors is always a good idea in case anything pops up unexpectedly. Have a back up cleaner, handy man, plumber, etc on file in case you need something in a pinch.

Wear and Tear

Guests aren’t always considerate of and aware the unit they’re staying in is somebody’s property and don’t care to treat the unit as if it’s their own. So it’s inevitable units will have repair costs at times throughout guests’ stay.

Utility Bills

Again, similar to the wear and tear, guests are not always aware of their use and who is responsible for paying utilities. Especially in Hawaii, where A/C feels like it’s a must, guest will probably choose to run the AC 24/7 and that is where the bill can get expensive.

Other things like leaving lights on, leaving iphone/laptop cords plugged in, or leaving the the TV on all night can also run up the electricity bill.

Set Aside a Rainy Day Fund

Just like in life, anything can and will happen. As a best practice, you should set aside a sizable rainy day fun for the unexpected repair.

Contact a South Maui Real Estate Specialist

Please consider me to be your trusted Maui real estate and lifestyle adviser. I was born and raised on the island, and spend a considerable amount of time to inform my clients about the best deals currently on the market. Don’t hesitate to call me for your any of your Maui real estate needs as I would be honored to assist you in your home search.